Investor clauses could be left out of EU-US trade deal

The EU's likely next trade commissioner has signalled that controversial investor protection rules allowing companies to sue governments could ultimately be left out of a transatlantic trade deal with the United States.

"I don't exclude that in the end it will be taken out," Swedish nominee Cecilia Malmstrom told MEPs during a public hearing on Monday (29 September), although she insisted that it would be 'premature' to exclude the clause from the talks, known as TTIP, already.

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The status of the investor protection clauses, known as investor state dispute settlement, dominated the three hours of questioning faced by Malmstrom, currently serving as the EU executive's home affairs commissioner.

The mechanism allows companies to take legal action against governments if their decisions risk undermining their investments.

Critics of ISDS claim that investor claims can prevent governments from passing legislation in fields such as environmental and social protection, enabling corporations to claim potentially unlimited damages in "arbitration panels" if their profits are adversely affected by new regulations.

Although Malmstrom's answers were more critical of ISDS provisions than the incumbent commissioner Karel de Gucht, with the Swedish official remarking that "I agree that there are problems with ISDS because there have been abuses," her responses will fall short of expectations for a number of MEPs.

While leaving her options open on the EU-US talks, Malmstrom ruled out the possibility of re-opening the just-concluded trade agreement with Canada to exclude ISDS, commenting that "eliminating ISDS from the Canada agreement would be a very bad idea" and could "unravel the agreement".

On Friday (26 September), Green MEP Sven Giegold published a draft of Malmstrom's written replies to questions posed by the committee in which the commissioner designate indicated that she would be prepared to leave TTIP out of the negotiations.

However, commission officials quickly backtracked, claiming that the answer had been based on the inaccurate reporting of a quote made by Jean-Claude Juncker, the next commission president.

Addressing MEPs, Malmstrom apologised for what she described as a "mix-up" in sending her written answers to the committee.

EU countries are already signed up to over 1,400 ISDS agreements, but the question of whether such provisions should be included in TTIP has become a sticking point in the talks.

Last week, German economics minister Sigmar Gabriel called on the commission to re-open the trade talks with the Canadian government to remove ISDS, on the basis that foreign investors already have sufficient legal protection in national courts.

David Martin, trade spokesman for the centre-left Socialist and Democrat group told Malmstrom that ISDS had become "a toxic issue for this parliament".

In response, Malmstrom said that MEPs had previously tasked the commission with drawing up a common EU approach to ISDS. "We need to limit the scope for abuse and increase transparency… make it clear that it can only be used as a last resort" she remarked.

The parliament's left-wing and Green groups have said they will not support future trade agreements which include ISDS provisions.

However, both US and EU trade officials have so far argued that ISDS should remain in any pact, and that it would not limit the right of governments to legislate in the public interest.

Meanwhile, Malmstrom promised she would increase MEPs' access to negotiation documents and publish a list of her meetings and correspondence with lobbyists on the trade talks, commenting that the EU executive "must demonstrate that we are not negotiating a secret deal behind the parliament's back."

The hearings for the 27 commission nominees will continue this week and will conclude on 7 October. MEPs will then vote on whether to back the commission team assembled by Jean-Claude Juncker.